Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd.
The Supreme Court ruled that companies distributing file-sharing software can be sued for their users' copyright infringement if the companies actively encouraged people to use the software to steal copyrighted music and movies.
The decision revives Hollywood and the music industry's lawsuit against Grokster and StreamCast, sending the case back to the lower courts, and creates a new legal path for going after technology companies that promote piracy even when their products also have legitimate uses.
“We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.”
The Court's central holding creating a new inducement-based theory of copyright liability.
How it got here: A federal trial court granted summary judgment to Grokster and StreamCast; the Ninth Circuit affirmed based on its reading of Sony; the Supreme Court agreed to review.
The Case in Depth
What happened
Grokster and StreamCast gave away free software letting computer users trade files directly with each other without a central server. A coalition of movie studios, record labels, and music publishers (MGM) sued, saying the companies knew — and had actively encouraged — that users mostly employed the software to illegally copy copyrighted songs and movies, especially after the shutdown of Napster sent millions of its users looking for a replacement.
The question before the Court
Could the companies behind Grokster and Morpheus be held legally responsible when millions of people used their free file-sharing software to swap copyrighted music and movies?
Why it matters
Technology companies that build sharing tools now have to worry about how they market and encourage use of their products, not just whether the products could theoretically be used lawfully. Copyright holders gained a stronger tool to pursue software distributors directly instead of chasing millions of individual downloaders, reshaping the legal risk calculus for anyone building file-sharing or similar dual-use technology.
What changes now
The case goes back to the lower courts, where MGM can pursue its inducement claim against Grokster and StreamCast, and where the companies' liability under the older distribution-based Sony theory may also be reconsidered on a fuller record. This is a final merits ruling on the legal standard, but it does not itself decide who ultimately wins — that will be worked out on remand.
What this does not decide
The Court did not decide whether Grokster's or StreamCast's software was actually "capable of substantial noninfringing use" under the older Sony distribution-based theory, and it left MGM's separate vicarious-liability theory unaddressed. The two concurrences disagreed sharply over how that unresolved Sony question should come out.
Concurrences and dissents
Concurrence — Justice Ginsburg
Justice Ginsburg agreed the Ninth Circuit misread Sony but argued the case should also go forward on a traditional product-distribution theory of contributory infringement, not just inducement. She found little real evidence of substantial noninfringing use in this record, unlike in Sony, and thought summary judgment for Grokster and StreamCast was wrong on that ground too.
Concurrence — Justice Breyer
Justice Breyer agreed the companies could be liable for inducement but disagreed that the distribution-based Sony claim should be revived. He read the evidence as showing Grokster's software met Sony's 'capable of substantial noninfringing use' standard, similar to the VCR's roughly 9% authorized use, and worried that requiring more concrete proof would chill technological innovation.
How the Court got there
The legal reasoning, step by step
- The Court explained that Sony Corp. v. Universal City Studios (the 1984 VCR case) shields a product's distributor from liability based merely on the fact that the product could be used for both lawful and unlawful purposes, so long as it is capable of substantial lawful use — but that rule only blocks liability built on assumptions about intent drawn from the product's design, not liability based on actual proof of intent.
- The Ninth Circuit had read Sony too broadly, treating it as barring any secondary liability whenever a product has substantial lawful uses, even when there is direct evidence the distributor wanted people to infringe. The Court held this misapplied Sony.
- Drawing on old patent-law and copyright cases, the Court adopted an 'inducement' rule: someone who distributes a device with the object of getting people to use it to infringe copyright, shown through clear statements or active steps to encourage infringement, can be held liable for the resulting infringement, regardless of the product's other lawful uses.
- Applying that rule, the Court pointed to StreamCast's internal memos and ads openly targeting former Napster users, both companies' failure to build any tools to filter out infringing files, and business models that made more money the more infringing files were shared — evidence a jury could see as showing an unlawful purpose.
- Because MGM had presented enough evidence on every element of this inducement claim — intent, a device capable of infringing use, and actual infringement by users — summary judgment for Grokster and StreamCast could not stand.
Doctrinal impact
Cases affected by this decision
Limits Sony Corp. of America v. Universal City Studios (464 U. S. 417)
Clarifies that Sony's shield for products with lawful uses doesn't block liability when there's real proof of intent to cause infringement.
Reaffirms Kalem Co. v. Harper Brothers (222 U. S. 55)
Relies on this century-old case as the historical root of liability for actively encouraging infringement.